Two Second Advantage – Real Time Decision Making - in Basketball and Business

Vivek Ranadivé is one of those CEOs who was born with
a silver quote in his mouth. He’s great on television, he gives
entertaining speeches, and interviewing him is like bathing in a river of
aphorisms and metaphors. I enjoy visiting Ranadivé at his company’s Palo
Alto, CA, headquarters not just in order to catch up on the news about his
software firmTIBCO,
but to hear which directions his thoughts have been taking him. Lately those
thoughts have had a lot to do with books and basketball.

On September 5, Crown Business will releaseThe
Two-Second Advantage, co-written by Ranadivé and Kevin Maney,
which, as its subtitle explains, is about “how we succeed by anticipating the
future—just enough.” In the book, as in most of his public remarks, you can see
Ranadivé taking the fundamental idea that unifies TIBCO’s software
products—-the value of sharing information within and between computer systems
in real time, the better to identify and act upon significant events and
trends—and stretching it to see how it applies to a growing range of
real-world problems, from telecommunications to macroeconomics to managing a professional
sports team.

Which leads to Ranadivé’s other current obsession. Last year the
software magnate became co-owner of the Golden State Warriors, the San
Francisco Bay Area’s NBA basketball team, joining a new ownership group
that includes movie producer Peter Guber, Kleiner Perkins partner Joe Lacob,
and real estate investor Erika Glazer. Ranadivé was already known for his
interest in basketball—see Malcolm Gladwell’s2009New Yorkerarticleon
underdogs, which largely focuses on Ranadivé’s strategies for coaching his
daughter’s National Junior Basketball team—and it’s no surprise at all that his
theories about the best way to run a professional team reflect his theories
about the best way to run a business, i.e., gaining an advantage through
data analysis.

Those subjects and others ran through my last conversation with
Ranadivé in July. Here’s an edited summary.

Xconomy:So, what have you been thinking about lately?

Vivek Ranadivé:I’m really excited, because I have a mission, which is
to say that if you get the right information to the right place at the right
time and put it in the right context, you can make the world a better
place. Every day I see more and more evidence of that. So the
theme continues.

One of the things I like to say is that science is dead.
You can spend a lot of time trying to understand why something happened,
or you can just know that if A, B, and C happened, then D will
happen. Examples of this are frequent. That plane that crashed of the coast of
Brazil—if they had connected the dots, they would have known that the flight
was going to end in disaster and made a turn and avoided the crash. In
cybersecurity, you can try to build a better lock, but somebody will also
find a way to pick it, or you can do what the Department of Defense and
the Department of Homeland Security have done, which is to use TIBCO’s
cybersecurity platform, which doesn’t try to build a bigger lock but looks
for suspicious activity. If A, B, and C happen, it knows there is
a bad guy in the neighborhood. This is a fundamentally different way
of thinking; it says that the information exists, and what you have to do is
connect A, B, and C to find out what happens next and avoid terrorism,
financial crises, pandemics.

I feel this idea is coming into its own, because there is more
and more information available every day. I wrote a paper recently
about how the Federal Reserve should be run. Why do you have a bunch of
old fogeys going through reports and, six months after the fact, making an
adjustment in interest rates? Why not make tiny constant adjustments? You don’t
turn on the heater in your house once every three months; if you did you would
always underheat or overheat the house. This is why the Federal Reserve has had
only one soft landing [after a recession] since World War II. If
I had that kind of track record as a CEO, I would have been
fired a long time ago.

The data is available. We can see how many cars are being sold,
how many houses, what merchandise is going where. All of that information is
beginning to be available in real time. So that is an agenda we are
driving hard.

X:Is this idea that “science is dead” one of the themes in
your book?

VR:Yes, I am continuing to drive this agenda in my book. If
you can get just a little of the right information just a little bit
beforehand, you can make a big difference. I collaborated with Kevin
Maney on this book. He is of the mindset that people who can do that kind of
pattern recognition in their heads succeed. It’s like Wayne Gretzky’s famous
quote about skating to where the puck is going to be. Whether you are looking
at a great CEO, a venture capitalist, or an athlete, that pattern
recognition theme emerges. In parallel, I was thinking about how you make
companies and governments more successful. It turns out to be the same thing,
so we collaborated on this book.

X:A big part of your message is that TIBCO’s software can
actually do this dot-connecting that you’re talking about, this pattern
recognition. Can you give me a real-world example?

VR:Look at Reliance, the largest telephone company in India. They
add four to five million customers every month, but they also lose 1.5 million
every month. It’s the world’s most competitive telco market. You can spend
hundreds of millions of dollars on twentienth-century database technology from
Oracle and Salesforce and you won’t solve the problem—you know that five
million will sign on and a million and a half will sign off. With
TIBCO, you can move from looking at historical transactions to looking at
real-time events. You have 50 million users and every time one of them makes
a call, it creates a fingerprint on the network. When a call is
dropped, that’s a fingerprint. Well, it turns out that if you drop six
calls in any 24-hour period, the customer is going to switch carriers. With our
infrastructure, we pick up every event, and we provide an alert that says,
“After the fifth dropped call, give him free SMS messages.”
Problem solved.

This applies everywhere. In retailing, we want to make you an
offer before you leave the aisle, not six months after you leave the store. We
know that if you buy garden fertilizer, there is a 90 percent chance you
will also buy seeds, and a 40 percent chance you will also buy garden
furniture. Furniture is a big-ticket item, so before you leave the aisle
we will send an offer to your mobile.

X:There still have to be human analysts in the loop to spot these
kinds of patterns, right? You’re not saying that the software itself can
detect them.

VR:We have a visual analytics tool called Spotfire that makes
these connections pop out. I’m using it to manage my basketball team.
I can see that there are some people who buy tickets but don’t buy
merchandise. There are other people who buy merchandise but don’t buy tickets.
If you look at their zip code, it may turn out that they are too far away. That
visual analysis pops out at you and tells you who to up-sell to. I can actually
apply the same thing to the game: what combination of players produces the best
results, where each player should be shooting from, where the other guys are
when they shoot, and when I should defend them and not let them shoot
from there.

X:Aren’t you basically talking about taking advantage of “big
data”? This is the same trend that scores of storage device makers and data
warehouse appliance makers and data center performance management software
providers are pushing.

VR:The database companies will have you believe that “big data”
equals databases. That’s just a scam so they can sell you big databases.
It’s true that the amount of data is going up. If you look at the amount of
information produced from the beginning of time to 2008, and the amount of
information produced between 2008 and now, it’s ten times more. It’s
mind-boggling. But the other side of the story is that the half-life of the
data is coming down, the amount of time you have to react is coming down. The
data has to be finding you—you can’t find the data. If you want to put it in
a database, do so by all means, but you’re going to find out after the
fact that you got hacked or that you lost a customer or that a fraud
was committed, and it’s going to be too late. We filter in real time and apply
the logic in real time, and then decide what to do. We are a real-time
nervous system that gets smarter on its own.

X:Go back to the basketball example. Are you really using TIBCO
software to help coach the Warriors in real time?

VR:You are not actually using the visual analytics technology while
you are playing the game. This is more of a situation where you are
finding A, B, and C. You pour in the data and you get a visualization. You
don’t know why, but you find that if you have these five guys playing, it’s
producing the best results. That’s very useful. Or you look at your players and
you see what their sweet spot is for shooting, so you make sure to feed them
the ball when they’re there. Or even better, you look at your opponent, and you
find that the star who’s scoring the most points has a certain place that
he likes to shoot from, so you make sure he never gets to go there. There is
amazing amounts of data available on every athlete in the NBA. I don’t
want to give away what we’re doing, but eventually it’s going to be possible to
make adjustments during an actual game.

X:As part owner of the Warriors, you’re interested in the business
side of the team too, right? How do the tools help there?

VR:We have found, as I was saying before, that 35 percent of
people who are buying tickets are not buying merchandise, and vice versa. That
creates an easy cross-sell or up-sell opportunity for us. If we know that
a guy bought a cap three years ago, maybe it’s time to give him a new
cap. There’s so much opportunity to implement loyalty programs, all based on
knowing “If A, B, and C, then D.”

X:With all of this automation of sales intelligence, I wonder
whether you guys are leaving any room for old fashioned salesmanship, based on
human intuition about a customer’s needs?

VR:We are all for that, except that we have a feedback loop
that will tell you much faster than anyone else whether it’s working or not.
Which is kind of what Zynga does. They have no idea which games are going to
fly. They just throw them out there and do constant A/B testing. Twenty-first
century companies like Zynga have made a business out of this. You can
test your intuition more quickly.